Net National Income:
Net national income, thus, is a crude index of measuring development on the ground that it does not consider population growth of a country.
A faster growth of net national income in a year may be eaten away by a much faster growth rate of population, thereby nothing is left for saving and capital accumulation. Further, this index of net national income does not say anything of the standard of living of the people. In spite of economic growth, the standard of living may be eroded because of high growth of population, income inequality, etc.
Another limitation of this index of development is that it does not say anything about the composition of goods and services produced. If ‘public bads’ (e.g., pollution) are produced more, society’s welfare will decline. In this sense, how much national income figure impinges ‘cost’ on the society following environmental pollution remains unaccounted. Any economic activity say, use of natural resources for extracting our needs damages environment. Since such is not deducted from the net national income figures, a good measure of human welfare is denied.
Per Capita Income as a Growth Indicator :
Dividing GDP/GNP by the total population one gets per capita GDP/GNP. Conventionally, per capita income is used as an index of development. Economic development involves something more than economic growth. Economic development emphasises on the qualitative aspects of economic expansion processes.
Anyway, this view says that increases in per capita income over a long period of time are suggestive of economic development. Greater the income, higher the standard of living of people, and lower the incidence of poverty and inequality. The only thing that has to be taken into account is that the growth rate of per capita income should exceed the country’s population growth—to have more growth and development.
However, the reality is not so simple as it has ‘been painted here. Although there may be a positive association between high income and higher level of development and between low income and a state of un-development, there are many reasons that suggest per capita income is not an acceptable criterion of development.